Africa's growth is gathering pace as energy and the booming consumer sectors continue to drive M&A market

Africa remains an exciting option for investors with immense opportunities that continue to inspire confidence and which, over time, will drive global growth. 

Positivity abounds for mergers and acquisitions for 2014 and onwards, with many predicting that the most active area for deals will continue to be the energy, mining and utilities sector, which, according to Mergermarket's report on Africa and the Middle East, provided seven out of the 10 largest deals in 2013. 

The consumer sector accounted for the next largest swathe of deals, and then, with the increasing need to develop new technological solutions, the media, technology and telecommunications sector. 

Africa's consumer sector has attracted much attention with its increasingly active expansion. Global brands are targeting brand-hungry consumers as the middle class has access to more and more disposable income. This does not only apply to foreign companies but local ones too, as they grow their businesses regionally. As a result, the consumer sector is expected to be one of the busiest in the year ahead and is well worth watching.

africa-map-webWhile the rest of the world continues to experience relatively flat M&A activity, Africa's rate of growth continues to attract investor interest even with the lack of transparency often found, the prevalence of corruption and the uncertainty that political risks in the continent can create. However, while the political environment is certainly not to be ignored, sub-Saharan Africa has never been as politically stable as it is now, and, with its improved fiscal, regulatory and financial conditions, investor confidence is at an all-time high.

All these positives mean that private equity firms are showing increased interest in the continent. They are in search of opportunities in emerging markets, and where better to currently look than Africa? 

Of course these days one cannot mention Africa without mentioning China, and Chinese interest is expected to be a key factor in driving M&A. Many of these deals will be in the energy, mining and utilities sector given China's need to satisfy the huge demands it has on its raw materials industries. This applies to India too.

In addition, Chinese companies are obtaining their own facilities in Africa by purchasing African businesses to meet the demand in the continent, where Chinese products are very popular. However, China is not the only driving factor of growth in Africa as African investors also play a key role. 

When considering the main hurdles M&A faces in the year ahead, economic stability is undoubtedly a key factor for investors looking to minimise risk. Due diligence is often restricted by the lack of facilities available, and, with transparency being key to successful due diligence, it is a concern when they are lacking. Having reliable data is essential for investors before making decisions. Political uncertainty and corruption are also a concern, with these factors frequently playing a role in the breakdown of deals. 

Generally, foreign investors enjoy high returns and maximised profits and shareholder value by taking advantage of the low interest rates, valuations and minimal regulatory hurdles that Africa offers. 

It is evident that while the rest of the world is slow-moving in its M&A progress, Africa offers myriad opportunities for those seeking investment in a unique continent, and is expected to continue to do so well beyond 2014.

Jonathan Lang is head of Bowman Gilfillan's Africa group.